Commercial Banks a Hit in CRE Borrowers’ Satisfaction Survey

Banks and life insurance companies are the preferred lenders for commercial real estate borrowers, who are likely to increase their overall borrowings this year, according to a new survey by the CRE Finance Council.

Banks and life insurance companies are the preferred lenders for commercial real estate borrowers, who are likely to increase their overall borrowings this year, according to a new survey by the CRE Finance Council, the results of which were released last Friday.

About one-third each of the nearly 100 respondents represented institutional owners/fund managers and owner-operators. REITs represented nearly one in five respondents.

This survey was a revised version of a study conducted in 2006, but going forward CREFC intends to conduct this survey annually.

Across almost all dollar ranges (the exceptions being $25–$50 million and $250–$500 million), commercial banks are willing to do larger loans and are the leading source of funding for survey participants. In the $50–$250 million range, the report stated, “participants are going to commercial banks with more than double the frequency of CMBS.”

It’s no surprise, then, that 43 percent of respondents indicated that they will target commercial banks for funding this year, a margin of 2:1 over other lender types. Life insurance companies were the second-leading option.

In other findings:

  • 46 percent of respondents will increase their borrowing volume for new financings in 2014, while 21 percent of respondents indicated a likely decrease. In contrast, this year only 30 percent of respondents will increase refinancing volume, versus 35 percent expecting it to decrease.
  • CMBS, followed by commercial banks, had the highest levels of activity in workouts and other special servicing events (31 percent and 24 percent, respectively).
  • Two-thirds of respondents had a positive workout/special servicing experience with commercial banks, but two-thirds of respondents had a negative experience with CMBS. Eighty-eight percent of respondents had either a neutral or positive experience with life insurance companies; private capital tied GSEs with 77 percent neutral or positive experiences.
  • “The most important factors in borrowing decisions are loan terms, certainty of execution, and rates and fees, followed closely by loan proceeds,” according to the report.
  • Respondents overwhelmingly believe that lenders across the board are becoming more competitive.
  • Commercial banks and life insurance companies shared the top score in overall borrower satisfaction, followed by GSEs, private capital and CMBS.
  • CMBS lagged all other lender types in satisfaction with post-closing experiences, such as prepayments, loan modification and loan assumption.